BENGALURU: At a time when BNPL (buy now, pay later) and e-wallets are booming, the Reserve Bank of India (RBI) has issued a notification disallowing non-bank prepaid payment instruments (PPI) issuers from loading credit lines.
This move is likely to impact fintech players who offer credit lines in partnership with non-banking financial companies. PPIs facilitate the purchase of goods and services and the conduct of financial services.
In a circular, the RBI said, “The PPI- MD (master direction) does not permit loading of PPIs from credit lines. Such practice, if followed, should be stopped immediately. Any non-compliance in this regard may attract penal action under provisions contained in the Payment and Settlement Systems Act, 2007”.
The RBI has warned only non-bank PPI issuers, as it allows PPIs to be loaded/reloaded by cash, debit to bank accounts, and credit and debit cards. There are 37 non-bank PPI issuers including Bajaj Finance, Amazon Pay and Phone Pe, among others. “If, the RBI has sent or intends a similar letter to even bank issuers, then even these business models could face restrictions and result in business model changes,” says Nomura in a report.
“We really don’t see a big difference in loading a PPI with a credit card that has an underlying credit line and is an allowed form-factor as against a running credit line from any lender, which is being prohibited. A credit card is just a form factor whereas the credit line is the actual lending service.
This needs further clarification, in our view,” it added. Meanwhile, the RBI has extended the timeline for implementation of certain provisions of Master Direction- issuance and conduct of credit and debit cards- from July 1, 2022, to October 1, 2022. Under the new directive, card issuers should seek OTP-based consent from the cardholder for activating a credit card if the same has not been activated by the customer for over 30 days from the date of issuance.